Nigerian Bonds Yield Falls to 15.46% as Inflation Crashes
Trailing the headline inflation rate, the benchmark yield on Nigerian government bonds fell to 15.46% as investors maintained positive sentiment over improving macroeconomic indicators.
Nigeria’s headline inflation has declined successively, settling at 16.05% in October, according to a consumer price index report released by the statistics office, from 18.02% in the previous month.
The disinflation spurred bargain hunting in the fixed income market as investors rushed to lock in yields on expectation of further rate cut by the Central Bank of Nigeria (CBN) monetary policy committee.
Investors have begun to price in lower spot rates at Debt Management Office (DMO) monthly auction for November as the authority move to ramp up local borrowings.
Market analysts explained that real interest rate expanded to about 11% with 27% policy rate standing against headline inflation to 16.05%.
On Monday, the average yields on government bonds compressed by 11bps to 15.46%, reflecting continued strong demand for domestic sovereign instruments as investors pursue compelling yield opportunities in the local fixed-income space.
Notably, the long-end curve saw the steepest yield decline, while yields at the short to mid-end curve dropped moderately. Analysts expect similar sentiment from investors in the near term as investors continue to react to the lower CPI data.
Looking ahead, given that inflation has moderated for the seventh consecutive time, the Monetary Policy Committee (MPC), in its next meeting scheduled for this month, is widely expected to opt for another rate cut, likely between 50 to 100 basis points (bps) as macroeconomic indicators continue to align, allowing the CBN to shift its focus towards supporting economic growth. Champion Breweries Rises by 11.5% Amidst Free Float Concern
